In Setting Targeting, Consider Competition, Motivation and Purchase History

As you can see in the best case the demo target only was 3 better than random in ROAS In most cases it was pretty close to 100 index ie random In the worst case the demo target was 24 worse than random in ROAS These were only the first cases as of 2011 By the time I left in 2014 there were thousands of like cases revealing that demography is a very poor predictor of ROIDemographics are not quite the worst targets The worst are lookalikes where the fusion hooks were demographics Even if the seed sample is the right type of purchasers quotright typequot explained below lookaliking using demographics to predict which IDs are likely to be good prospects is only slightly better than just targeting demographics If you have to target demographics it39s better to give everyone a weight of quottargetnessquot rather than exclude the lowest current usage demosBut you don39t have to target demographics Today there is a wealth of more advanced targeting information available which can be used for more predictive forms of targeting Even in a world in which ID based targeting becomes limited to a portion of the population contentbased targeting can still be used with advanced targets For example in the prior post it was shown that lookaliking based on the ID39s previous content consumption provides much better results than demographic targeting The programs and websites used by a person are a far better predictor of that person39s true interests than their demographicsTwo theories of targeting one very well known the other known only to cognoscenti are the basis of debates among advertising intelligentsia This debate has been going on for 20 years I intend to resolve it in this columnEveryone knows Byron Sharp39s famous dictum amp8211 echoing Peter Drucker but using data amp8211 that a brand can only grow by bringing in new customersVery few people know of the Loyalist Principle targeting one39s most profitable customers amp8211 the 10 who supply half the brand39s annual profits This was discovered by Larry Light working with Mike Donahue of the 4A39sOn the face of it the two theories are diametrically opposed However they could both be true and require a balancing act to use both using each one exactly to the right degree for the situationFor example protection of the current profitable core might turn out to be the right strategy for a declining brand especially if the CEO decides to cut its advertising and promotion budgets Promotion was a big factor in the Larry Light 4A39s study 20 years ago Larry pointed out to the client that the profitable loyal customers did not need price incentives Occasional buyers were thoughtfound to be the ones who needed price incentives to buy that brandPromotion is the most overused marketing tool which would show more advanced visitors from another planet just how early we still are in our marketing science development It39s easy to see how the vast size of the promotion discounting budget typically four times the size of the advertising budget could lead a marketer to want to reduce it which could lead to thinking about giving up on bribing the occasional buyers with promotionsHowever in 2006 there was a discovery which overturns the notion that occasional brand buyers only buy on deal I made the discovery at TRA We found that the highest ROAS on advertising always comes from what I called Heavy Swing Purchasers HSPs These were category heavy spenders who had purchased your brand 2575 of the time over the past three years It was actually not that percentage of the time but of the dollars spent in the category This is called Share Of Requirements SORWe looked at the price paid as an indicator of promotion and only a minority of HSP purchases were accounted for by buying on deal Dealbased buying was a different pattern and we could identify those households and predict what they were going to buy quite easily based on pricing patterns The dealbased buyers are a segment that cuts across product categories The HSP phenomenon is orthogonal to the dealbuyer phenomenonMy explanation for the HSP phenomenon goes back to my days as EVP of Brand Rating Index the first of the longquestionnaires syndicated services forerunner to today39s MRISimmons Simmons was doing magazine but not product measurement when BRI began to combine both In one multicategory study in which the same sample was interviewed again six months later I saw that over 80 of the people indicating a different brand as their first choice as compared to six months earlier had considered that nowfavored brand their second choice six months ago This taught me that an occasionally purchased brand could be the understudy for that person39s next favorite brandIf advertising is a light tap as Erwin Ephron taught us that light tap is more likely to succeed in getting you to buy a brand you already do buy from time to time Versus getting you to change behavior pattern entirely by trying a brand you have never tried before That39s much harder to do without there having been a bad disappointment in their current brand recentlyLeslie Wood at Nielsen NCS a few years later corroborated the HSP finding by using a slightly different version called Category HeavyBrand Light amp8211 households who buy the category heavily and buy the brand only lightly NCS has compiled its highest learnings at this siteFormer ARF Chief Researcher Joel Rubinson has once again validated HSPs using a slightly different variant he calls brilliantly the Movable Middle which I believe is a better name His research suggests that the optimal range is 2080 of SOR to use in targetingAlas I set out to cover more than can be condensed into one post How do competition and motivations fit into targeting considerations Is there more to be learned from purchase histories that relate to targeting YesI have much more to say about this subject hereClick the social buttons to share this content with your friends and colleaguesThe opinions and points of view expressed in this content are exclusively the views of the author andor subjects and do not necessarily represent the views of MediaVillagecomMyersBizNet Inc management or associated writers

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In Setting Targeting, Consider Competition, Motivation and Purchase History

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Bill Harvey

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